GIS / HireRight merger impact on hiring costs

Background screening consolidation reflects workforce trends

General Information Services (GIS) and HireRight recently announced a definitive agreement under which the two companies will merge. Both are international providers of pre-employment background screening and drug-testing services. GIS is one of only seventy-five background-screening companies accredited by NAPBS, the National Association of Professional Background Screeners.

Announcing the merger, GIS and HireRight expect that the combined company will serve clients in more than 225 countries and deliver cutting-edge service solutions across all business sectors.

Our team at LAC Spend Management believes the merger is going to benefit many of our clients. They will see the increased speed of turnaround time on background check requests, coupled with the same fantastic commitment to customer service and integrity. It sounds like a win, and we’re excited for all the ways the merger will be of benefit.

GIS and HireRight views of the merger

“Together with HireRight, we will offer an enhanced suite of integrated screening, monitoring, and risk management solutions on a global scale to a broader set of customers.”

Mr. Abramo will be the CEO of the newly formed holding company for the combined enterprise.

And HireRight CEO Jurgen Leijdekker says this:

“GIS has a rich history of superior customer focus with recognized customer service excellence, mirroring HireRight’s top values and aligning well with our global footprint, operational platform, and award-winning Applicant Center. Together, the two companies will bring unparalleled capabilities, expertise, and experience to customers and applicants around the world.”

View the entire press release (HireRight and GIS to Merge, May 25, 2018)

Industries with high employee background screening needs

Employee background checks are a significant and ongoing indirect spend category and are especially important for some industries, including:

Companies in the hospitality sector, in particular those with employees that handle cash or deposits

Businesses that offer commercial services, such as banking, credit unions and financial advisory

Property management companies, particularly those with employees who perform maintenance and repairs in customers’ homes

Businesses offering home-based healthcare services as well as a variety of medical service providers including nursing homes and hospitals

Organizations and entities that serve children and families including schools, daycare centers, summer camps and park districts to name a few.

According to a widely quoted statistic from the Society for Human Resource Management (SHRM), the average cost-per-hire is $4,129 (“Average Cost-per-Hire for Companies Is $4,129, SHRM Survey Finds,” August 3, 2016). To avoid doing a background check and hiring someone who would otherwise be found to be unacceptable risks beginning a new search and incurring thousands of dollars in additional costs.

Companies who hire workers in multiple jurisdictions recognize that HR laws lack uniformity. Ban-the-Box legislation, which requires removal of job application questions concerning criminal convictions, is a good example. As of March 2018, 12 states and 17 cities and counties have passed Ban-the-Box legislation, with widely varying rules

Several cities and states have passed pay-equity legislation that prevents employers from inquiring about a candidates’ salary history, but, again, laws vary from one jurisdiction to another

As of late 2017, a majority of U.S. companies said they were not fully prepared to comply with the European Union’s General Data Protection Regulation (GDPR)—Only 39% surveyed said they are fully prepared

GDPR penalties are substantial, with organizations found guilty of committing serious violations looking at fines of up to €20 million or 4% of the company’s worldwide gross, according to the firm of Littler Mendelson.

Global workforce and foreign-born worker trends

Projections by HireRight for a growing proportion of foreign-born workers to be employed in the U.S. underscore the need for HR professionals to manage screening of a globalized workforce:

HireRight found that only a bit more than half of organizations conducting background checks beyond the United States have policies guiding how such global verifications should be conducted

They note that although the current number of foreign-born U.S. employees is small at about 27 million people (17% of workers), the number is growing

This points up the need for companies to have a comprehensive global screening policy for candidates who were born, lived, were educated or worked abroad. Companies should be prepared for such complex background checks to take longer than those for candidates residing only in the United States

Marijuana legalization affecting screening requirements

HireRight found in their survey that drug screening of potential hires is becoming increasingly complex due to shifting laws regarding marijuana use:

HireRight’s 2018 benchmarking study found that as of six years ago, 79% of survey respondents said that their company had neither a policy nor plans to create a policy concerning medical use of marijuana. Currently, 67% of such respondents do have a medical marijuana policy

Currently, twenty-nine states and the District of Columbia have legalized use of medical marijuana, with nine states and the District legalizing recreational use. Despite this, companies continue to be challenged with how to address employee or candidate marijuana use among employees—22% of HR respondents surveyed called medical marijuana use one of their biggest compliance challenges

All these factors mean background screening may become a standard part of the hiring process for all positions and in all industries.

Background checks and other HR-related expenses are one of the indirect spend categories for which LAC Spend Management Services offers consulting services and spend management programs to monitor costs.

If you have questions about how this merger might affect your organization or about anything else related to employee screening expenses, contact me.

Susan Walker

Susan Walker is LAC Group's Director of Procurement Strategy and an expert in procurement best practices including sourcing, negotiating, vendor relationship management, and contracts. She is a Certified Purchasing Manager and holds an M.B.A. from the Lake Forest Graduate School of Management.